1a. There are two countries - the U.S and Europe. Each economy produces two goods, tradables and nontradables. Each country has one hundred workers. You should assume that the price of tradables is one. In the US, it takes 5 workers to produce one unit of nontradables. It takes ten workers to produce one unit of tradables. In Europe it takes ten workers to produce one unit of tradables and nontradables. What is the wage rate in Europe?

1b. What is the wage rate in the U.S?

1c. Suppose that the productivity of labor falls in the US. It now 10 workers to produce one unit of nontradables while the productivity of workers in tradables stays the same. What is the wage rate in the U.S now?

1d. What is the relative price of nontraded goods in the U.S after the fall in U.S productivity?

1e. What is the relative price of nontraded goods in Europe?